The average price for a barrel of WTI crude oil has remained below $100/barrel for the past month, and it is dropping again this morning to near $98/barrel. Pump prices for regular gasoline in the US are also falling, down nearly -$0.02/gallon in the past week to about $3.27/gallon.
A CNBC survey of 10 analysts shows that 5 expect crude prices to continue dropping this week, while 4 expect prices to rise and 1 expects prices to remain the same. The split appears to depend on how an analyst interprets last week’s agreement reached among the nations of the Eurozone.
The oil bulls argue this way:
Oil should benefit substantially from Friday’s outcome as traders can now place less emphasis on Europe in the short-term and focus more on the positive news we are seeing in the U.S.
The oil bears aren’t so sanguine:
The crisis will not be gone by next week. Crude oil will not sustain these levels for long. Correction lower is inevitable.
Production of more than 10 million barrels/day in Saudi Arabia last month, coupled with the country’s statement that it could and would continue to supply enough crude to satisfy its customers is helping to hold prices in check. But the International Energy Agency warns that international oil inventories remain at historically low levels, which would ordinarily mean that prices could rise as inventories are rebuilt.
About all that we can conclude is that volatility in the crude market is likely to remain but that the trading range will be fairly narrow.
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